Amortized Loan
Because it uses the word "amortized," these loans sound very snooty. Like if you were to meet someone named Chester Hamilton Festerbottom IV. You'd assume he comes from a long line of monocle salesmen. But you don't know him...he might enjoy Mr. Pibb and MMA and own a tattoo parlor down by the airport.
Same with amortized loans. They aren't snooty. They're actually very down to Earth. All the things you likely think of first when you think of loans (car loans, home loans, personal loans) typically fall under this category.
Amortized loans are just ones that are paid off in installments. The interest and principal are figured up front and then divided into regular payments.
Say you're buying a $20,000 car. You put $5,000 down and will be getting a 60-month loan for the rest of the cost, with a 5% interest rate. So $15,000 at 5% over five years. So that's $750 a year in interest (5% of $15,000) times five years (making a total of $3,750 in interest for the life of the loan). So you'll be paying the lender $18,750 total ($15,000 principal + $3,750 interest). Divide that by 60 months and you get a monthly payment of $312.50.
Often times, the loan schedules are organized so more interest is paid in the early stages of the loan, with the majority of the principal getting paid off later.
Related or Semi-related Video
Finance: What are Fixed Assets, Tangible...32 Views
finance a la shmoop what are fixed assets and no they're not what people
gratefully have when they leave the proctologist office fixed assets are
fixed as in fixed in place hard items things you can kick in you know whiz on [man tried to pull sword out of stone]
general rules for fixed assets one they're not used up in that accounting
year like inventory isn't a fixed asset and two they're typically in physical
form like a contract or a patent is not a fixed asset and three they're listed [contract and patent docs]
as property plant and equipment on the balance sheet at least usually fixed
assets you have land and you have plants and you have computers the software on
them all fixed assets and these are tangible ones so then what are
intangible fixed assets well basically things that are not
touchable or physically you know they're not feel about those would be things
like well our shmoop logo our shmoop guides intellectual property the stuff [Shmoop website images]
you're watching right now and other copy written material all that kind of stuff
intangible that famous factory smelting plant we're always talking about here [something gets thrown into industrial smelting pot]
from up fixed tangible asset the hundred eighty eight acres of the legal pot
growing farm owned by Mary Jane industries fixed asset the secret recipe [Mary Jane in her pot farm]
owned by coke which names the ingredient beyond sugar in the fizzy water that
makes coke oh so great intangible fixed asset anyway these big fat fixed assets
carry heft and illiquidity like you can't just quickly sell a hundred eighty
eight acres of a pot farm in well get a whole lot of money for it same deal with [Mary Jane unhappy with her attempt to sell the farm]
the smelting factory or eight miles of styrofoam packing peanuts [shower of packing peanuts]
even if they do as our proctologist says give you you know more cushion for the
pushin don't eat those things [doctor gives man a shot]
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